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The purpose of this study is to examine whether executive compensation structure is a predictor of a value judgment shift facilitating fraud. The Raval (2018) disposition-based fraud model theorizes that in a fraud, a judgment shift occurs that results in an intentional action. Judgment shifts are influenced by intertemporal rewards, an executive compensation structure comprising salary (immediate reward) and delayed compensation in performance-based incentives.

Using an archival data set consisting of frauds identified through Securities and Exchange Commission Accounting and Auditing Enforcement Releases, the compensation structure of executives involved in frauds is compared against the compensation structure of executives in a peer control group.

There was a significant difference in the intertemporal rewards of the compensation structures between the two groups, indicating that compensation structure presents intertemporal choices leading to a judgment shift that influences the deliberate action of fraud.

This study represents the first empirical test of the disposition-based fraud model using intertemporal rewards leading to judgment shift.

Executive compensation structure should reduce intertemporal rewards for executives reducing judgment shifts that can result in risk of fraud.

This study addresses how executive compensation structure can result in fraud.

Given the serious question raised by the subprime of the 2008 global financial crisis over the rising practices of excessive rewarding of executives in the USA and European firms, the executive pay-performance nexus has emerged as a popular topic of debate in the contemporary corporate finance research. Conducted mostly on the Anglo-Saxon contexts, research outcomes have been inconclusive and dichotomous. Considering this backdrop, this study aims to investigate the endogenous relationship between executive compensation and risk taking in the context of the USA.

Using a large sample of non-financial firms from 2010 to 2020 based on panel data and two-stage least square regression. In this study, the riskier corporate decision is measured as book leverage and ratio of R&D expense to total assets. Chief executive officers’ (CEO) experience and age are used as instrumental variables, and these are expected to influence compensation incentives and, hence, affect firm riskiness indirectly. Firm size, return on assets and CEO turnover are reported to affect compensation and corporate decisions, therefore, included as control variables. Given that higher executive compensation is related to riskier corporate decision in firms, this study incorporates total wealth (i.e. accumulated equity related compensation) as an additional proxy of compensation, and this selection is justifiable by the perfect contracting notion of the agency theory.

The results of this study show a significant positive and increasing nexus among compensation and riskier corporate decisions. Besides, the compensation level proxied through the percentage of each form of compensation in total compensation is very important as greater equity and greater salary diminishes risk taking.

The outcomes of this study have useful implications for firm stakeholders and policymakers.

The level of pay measured by the percentage of each type of compensation in total compensation is of utmost importance as it can increase or decrease risk taking in corporate decisions.

This paper aims to establish a theoretical framework that can comprehensively explain the executive compensation in state-owned enterprises (SOEs) within the context of socialism with Chinese characteristics.

The author develops a theoretical framework for executive compensation in SOEs from the perspective of Marxist economics and points out that the executives in SOEs are engaged in management labor, and their compensation should adhere to the principle of distribution according to labor contribution.

Based on this theory, the author posits that the continuous upward trend of executive compensation in SOEs, is consistent with the trend of SOEs' ongoing expansion, which reflects a continuous improvement of SOE executives' management labor in both quality and quantity.

It is necessary to start with Marxist economic theory and scientifically study the issue of SOE executive compensation, adhere to the principle of distribution according to work in the context of a socialist market economy and implement the specific guideline of the Party Central Committee; only in this way can the long-term healthy development of SOEs be promoted continuously.

This study aims to investigate whether integrating environmental, social and governance (ESG) practices mediates the relationship between executive incentive compensation and the financial performance of Islamic and conventional banks in the Middle East and North Africa (MENA) region.

This study used multiple regression models to analyze the effectiveness of ESG practices as a mediating variable in explaining the relationship between executive incentive compensation and banks’ financial performance between 2015 and 2021. The sample consisted of 57 Islamic and conventional banks operating in the MENA region, and the data were collected from the Thomson Reuters database (Data Stream).

This research paper showed the positive and significant mediating effect of the ESG practice on Banks’ financial performance. Thus, banks’ financial and stock market profitability is influenced by ESG information disclosure. This finding shows that taking ESG into account improves the relationship between executive incentive compensation and banks’ financial performance.

The results may interest academic researchers, regulators and policymakers and would support stakeholders and decision-makers who wish to discover how executive incentive compensation affects financial performance in banks.

This study contributes to previous literature by studying the mediating effect of ESG practices on the relationship between executive incentive compensation and banks’ financial performance. Indeed, the originality of this research paper is justified by the scarcity of studies and, to the best of the authors’ knowledge, constitutes one of the first attempts to examine this relationship via a mediating variable, i.e. ESG.

This study investigates the relationship between outside directors, managerial compensation, and firm performance in the Korean insurance industry.

The authors employ a simultaneous equation framework by using three-stage least squares (3SLS) to address the endogeneity problems that could result from the joint determination of outside directors, firm performance, and executive compensation in Korean insurance companies.

The authors find that the ratio of outside directors on the board is negatively associated with insurance firm's value and financial profitability. In addition, this study's evidence shows that greater representation on the board by outside directors leads to a higher level of executive pay. In particular, the authors provide evidence that variable compensation scheme and outside directors who have backgrounds in the legal profession and former high-ranking government officials drive this study's main results.

This study adds to the literature by first demonstrating the interaction effects between outside directors, firm performance, and executive compensation in the Korean insurance industry. Unlike previous studies that typically focus on US companies, the authors study the Korean insurance sector that is an emerging power in the global insurance market, ranking seventh in terms of total premium volume, and show that the Korean insurance firm's outside directors system does not work in the manner that it is intended to function.

The authors examine the association between corporate social responsibility (CSR) and abnormal executive compensation. The authors hypothesize that socially responsible firms are more likely to pay their executives at a level that is in line with economic determinants.

Using the expected compensation model developed by Core et al. (2008), the authors test our hypothesis using a large sample of US public companies.

The authors find that CSR performance is negatively associated with how much executive compensation deviates from the expected level. The authors further examine whether CSR performance is associated with excess compensation or inadequate compensation and find that socially responsible firms are less likely to pay their executives either excessively or inadequately.

This study provides evidence on the association between CSR performance and abnormal executive compensation, especially how CSR is associated with inadequate compensation, an area that has been largely overlooked by the literature.

This article investigated whether the executives' compensation and corporate governance attributes are aligned with stakeholders' demands for higher corporate voluntary disclosures. Moreover, the study also examined the moderating role of the auditor's reputation in the direction of association among executive compensation, corporate governance attributes, and voluntary disclosures.

The study used a sample of S&P BSE index constituents' 90 Indian firms for 2017–2019. The voluntary disclosure scores were fetched from the India Disclosure Index Report published by FTI Consulting. This analysis was carried out in two parts by applying four panel-data regression models in the agency and signalling theories framework. First, the study examined the association between executive compensation, board strength, composition, gender diversity, and voluntary disclosures. Second, the article investigated the moderating role of the “Big 4” in the direction of association among executive compensation, corporate governance attributes, and voluntary disclosures.

The willingness of executives to share private information with stakeholders depends on the compensation they receive from their employer. The higher compensation paid to executives leads to a higher “tone from the top,” which is better aligned with stakeholder interests. Further, the research also found that bigger board sizes, a higher proportion of independent and woman directors (indicators of good governance), and an auditor's reputation are associated with increased voluntary disclosure.

The findings showed that the executives' compensation and corporate governance attributes are aligned with stakeholders' demand for higher voluntary information from firms. Moreover, the study also found that the “Big 4” play a moderating role in this direction. The choice of a reputed auditor indicates the firms' long-term positive future perspectives, which strengthens investor confidence in the financial market.

The study suggests that fair executive compensation can address the agency problem.

This research furnishes managers and different stakeholders with significant implications of executives' compensation, corporate governance, and auditor's reputation in the best interests of a firm through reducing potential risks of information asymmetry.

This study investigates the empirical association between environmental, social and corporate governance (ESG) performance and top executive compensation in the US financial services industry. Considering that financial firms can inflict systemic shocks across the economy, it has been argued that they must conduct ethical and sustainable business in accordance with ESG principles. This study examines whether ESG efforts are beneficial to managers.

The authors use CEO compensation and ESG performance ratings data for all US financial firms (SIC 6000–6799) from 2015 to 2019. Employing fixed effects regressions, the authors test whether lagged ESG performance is related to CEO compensation, after controlling for other firm characteristics such as size, financial performance, leverage and CEO stock ownership.

The authors find that lagged ESG ratings are strongly associated with all forms of compensation. An increase of one standard deviation in the composite ESG rating is associated with a 14%–16% increase in the total pay. Among the three ESG pillars, only S (social) and G (governance) exhibit persistent and significant associations with both short- and long-term executive pay. The authors also document the significant moderating effects of ESG on the relationships among firm performance, size, leverage, ownership and executive pay, identifying how ESG is associated with compensation.

The authors conclude that managers receive ESG incentives implicitly and explicitly. The novel finding of direct and indirect associations between ESG and top executive compensation contributes to the growing ESG literature on the financial sector and ongoing debate about the explicit inclusion of ESG targets in compensation design.

The purpose of this study is to investigate how two types of drivers, namely, executive compensation and market competition, can affect hospital quality in the USA. Recently, patients, insurers and regulators have increasingly focused on hospital quality. Understanding the interplay of incentives in this industry is important because in 2019, hospital treatment contributed $1.161bn to health-care costs in the USA. This study answers the call for more studies in the so-called “mixed” industry, where ownership differences can affect organizational objectives and operating constraints.

This study explores the roles of hospital executive compensation and industry competition as determinants of health-care quality. Specifically, the study probes the heterogeneity in the factors that influence quality across hospital types in the USA.

Using California hospital data from 2006 through 2020, the findings show that the effects of compensation and competition on hospital quality differ by ownership type. Executive compensation is positively associated with quality in for-profit hospitals but is not associated with that of nonprofit hospitals, suggesting for-profit hospitals are more likely to use higher levels of compensation to attract managers with higher ability, whereas the utility function for nonprofit managers may be multidimensional. Within the nonprofit hospital group, competition is more positively associated with quality for religious nonprofits relative to secular nonprofits, suggesting that competition provides more monitoring for religious hospitals.

Taken together, the findings provide evidence that the drivers of quality vary across hospitals in ways consistent with differences in constraints and objectives across ownership types. The findings are important for regulators seeking to incentivize higher quality. For example, Medicare in the USA has incorporated quality measures into its new hospital reimbursement scheme (value-based purchasing) to incentivize quality. This study proposes that regulators should consider differences across ownership types when evaluating the best ways to incentivize hospital quality.

The authors extend the recent research using the risk component of human resource’s (HR’s) compensation plans to examine the effects of risk components on two strategic outcomes: within-firm temporal change, or strategic variation, and firm strategic divergence from the industry, or strategic deviation. In addition, the authors examine the role of previous financial performance as a boundary moderator condition of the effects of risk components in the compensation plan and firm strategic outcomes.

To examine the effects of low- and high-risk components of executive compensation on strategic variation and deviation over time, the authors collected data from 2,510 companies listed in the Standard and Poor’s 500 index in a panel data format of a 12-year period. The authors gathered financial and other firm-level data from COMPUSTAT, and executive compensation and executive-level data from ExecuComp.

The findings support the main effects of risk components on strategic change, while both high- and low-risk components act on strategic deviation contingent on the moderating role of total shareholder return (TSR). In the theoretical framework, the authors test the moderating role of total shareholder return (TSR) as a boundary condition of the effects of risk components in the compensation plan. In doing so, the authors provide a fine-grained understanding of the influence of compensation plan risk components on outcomes proximal to executives, such as the maintenance of the status quo and the search for financial gains.

New studies can explore a three-way moderating effect on performance indicators, such as TSR, Tobin’s Q and return on asset. The authors addressed this limitation and did a comparative analysis, but the authors did not include additional moderating mechanisms in these interactive effects.

By disaggregating the executive’s compensation based on the risk components, boards of directors can mitigate any possible unwanted biases in the relationship between principal and agent.

By considering the influence of both low- and high-risk components of compensation plans on strategic outcomes –instead of firm performance – this study expands strategy literature supporting the influence of compensation schema on a firm’s outcomes. This path is new because it offers a moderating perspective to understand the strategic deviations and changes that chief executive officers imprint in their firms.

Los autores amplían la investigación reciente usando el componente de riesgo de los planes de compensación de RH para examinar los efectos de los componentes de riesgo en dos resultados estratégicos: cambio temporal dentro de la empresa, o variación estratégica, y divergencia estratégica de la empresa de la industria, o desviación estratégica. Además, examinamos el papel del desempeño financiero anterior como una condición moderadora límite de los efectos de los componentes de riesgo en el plan de compensación y los resultados estratégicos de la empresa.

Para examinar los efectos de los componentes de alto y bajo riesgo de la compensación ejecutiva en la variación y desviación estratégica a lo largo del tiempo, recopilamos datos de 2510 empresas que figuran en el índice Standard & Poor's 500 en un formato de datos de panel de un período de 12 años. Los autores recopilaron datos financieros y de otro tipo a nivel de empresa de COMPUSTAT, y compensación de ejecutivos, y datos a nivel ejecutivo de EXECUCOMP.

Nuestros hallazgos respaldan los efectos principales de los componentes de riesgo en el cambio estratégico, mientras que los componentes de alto y bajo riesgo actúan sobre la desviación estratégica dependiendo del papel moderador del rendimiento total del accionista. En el marco teórico, los autores prueban el papel moderador del Retorno Total del Accionista como condición límite de los efectos de los componentes de riesgo en el plan de compensación. Al hacerlo, brindamos una comprensión detallada de la influencia de los componentes de riesgo del plan de compensación en los resultados próximos a los ejecutivos, como el mantenimiento del statu quo y la búsqueda de ganancias financieras.

al considerar la influencia de los componentes de bajo y alto riesgo de los planes de compensación en los resultados estratégicos, en lugar del desempeño de la empresa, este estudio amplía la literatura de estrategia que respalda la influencia del esquema de compensación en los resultados de una empresa. Este camino es nuevo porque ofrece una perspectiva moderadora para entender las desviaciones y cambios estratégicos que los CEOs imprimen en sus firmas.

los nuevos estudios pueden explorar un efecto moderador de tres vías en los indicadores de rendimiento, como TSR, Tobin's Q y ROA. Abordamos esta limitación e hicimos un análisis comparativo, pero no incluimos mecanismos moderadores adicionales en estos efectos interactivos.

al desagregar la compensación del ejecutivo en función de los componentes de riesgo, las juntas directivas pueden mitigar cualquier posible sesgo no deseado en la relación entre el principal y el agente.

Os autores estendem a pesquisa recente usando o componente de risco dos planos de remuneração de RH para examinar os efeitos dos componentes de risco em dois resultados estratégicos: mudança temporal dentro da empresa, ou variação estratégica, e divergência estratégica da empresa do setor, ou desvio estratégico. Além disso, examinamos o papel do desempenho financeiro anterior como uma condição moderadora dos efeitos dos componentes de risco no plano de remuneração e nos resultados estratégicos da empresa.

Para examinar os efeitos dos componentes de baixo e alto risco da remuneração executiva na variação e desvio estratégico ao longo do tempo, coletamos dados de 2.510 empresas listadas no índice Standard & Poor's 500 em um formato de dados de painel de um período de 12 anos. Os autores coletaram dados financeiros e de outros níveis da empresa da COMPUSTAT, remuneração executiva e dados de nível executivo da EXECUCOMP.

Nossos resultados suportam os principais efeitos dos componentes de risco na mudança estratégica, enquanto os componentes de alto e baixo risco atuam no desvio estratégico contingente ao papel moderador do Retorno Total ao Acionista. No referencial teórico, os autores testam o papel moderador do Total Shareholder Return como condição limite dos efeitos dos componentes de risco no plano de remuneração. Ao fazer isso, fornecemos uma compreensão refinada da influência dos componentes de risco do plano de remuneração nos resultados próximos aos executivos, como a manutenção do status quo e a busca por ganhos financeiros.

ao considerar a influência dos componentes de baixo e alto risco dos planos de remuneração nos resultados estratégicos -em vez do desempenho da empresa- este estudo expande a literatura de estratégia que apoia a influência do esquema de remuneração nos resultados de uma empresa. Esse caminho é novo porque oferece uma perspectiva moderadora para entender os desvios e mudanças estratégicas que os CEOs imprimem em suas empresas.

Novos estudos podem explorar um efeito moderador de três vias em indicadores de desempenho, como TSR, Q de Tobin e ROA. Abordamos essa limitação e fizemos uma análise comparativa, mas não incluímos mecanismos moderadores adicionais nesses efeitos interativos.

Ao desagregar a remuneração do executivo com base nos componentes de risco, os conselhos de administração podem mitigar possíveis vieses indesejados na relação entre principal e agente.